Export and Import between Countries - Case Study Example

Export and Import Between Countries Name Class Unit Executive summary This report has analyzed challenges in doing global business with main focus on imports and exports. The report starts by defining globalization as the increase in interdependence among countries due to a rise in the trade integration, cash flow, and views which is carried out in the global market place. With globalization, international trade has increased rapidly. The report asserts that the success of international trade is determined by the market strategy. This is due to fact that international market is unpredictable. The market is characterized by rules and regulations which must be followed at all times. There are culture differences, language barriers and trade rules and regulations in the trade. Terms of trade have been the main regulators of the amount of imports and exports. In Australia, the customs sets rules and regulations for the imports and exports. There are rules on dumping and subsidies which affects the importers and exporters. Foreign exchange is a challenge that faces international trade. The volatility of valuations of the currency has an effect as it determines the costs of the imports and exports. Australia major trading partners are United States and China. When engaging in international trade, business is advised to look at all critical issues as discussed in the report to avoid risks. Contents Executive summary 2 Contents 3 Introduction 4 Globalization and international trade 4 Import and export business 5 Terms of trade in Australia 6 Customs 6 Challenge of exchange rates 7 Trading partners and barriers 8 Conclusion and recommendations 8 References 10 Introduction With the rise of globalization, international trade has been growing. Globalization refers to the increase in interdependence among countries due to a rise in the trade integration, cash flow, and views which is carried out in the global market place. Due to the integration of different countries, cross border trade is enabled. Globalization increased at a fast rate in the mid 1980s driven by the technological development and increase in market liberalization. Most of the countries’ economies have benefited immensely from globalization such as the East Asian economies. As the countries participate in the global trade, there are costs and benefits. The countries are also able to benefit from the access to a larger market and international division of labor (Czinkota, Ronkainen & Moffett 31). The consumers are able to enjoy goods at reduced prices due to imports among other benefits. Despite the benefits, there are risks in international trade such as increased competition. Australia has been participating in the international trade for a long time. The participation has resulted in benefits and risks for the country (Folsom 20). This report will look at the challenges of doing business in the global environment with a focus on imports and exports. Issues that will be addressed are globalization, international trade in Australia, terms of trade, customs in Australia, exchange rate and Australia trading partners. The report will use peer reviewed journals, government websites and other academic sources to address the impacts with reference to Australia. Globalization and international trade Globalization has led to an increase in the international trade. The statistics have shown that the trade has been growing in the favor of the developed and developing countries. The share of the exports from the developed countries to developing countries has been growing. Most of the developing countries have been increasing their trade in the manufactured goods as exports to the developed countries. Due to globalization, there is unrestricted access to the markets. The increase in market liberalization means that there is no government intervention in imports and exports. This means that the government is only involved in actions that cannot hurt international trade. The governments have refrained from actions such as introduction of trade barriers, quotas and any restriction that may affect trade negatively. Australia has realized that trading internationally is an avenue of developing new markets. As the country opens to international trade, they are dealing with the customs, foreign governments, banks, service providers on exports and importers and international business carriers (Folsom 25). Import and export business Success of the country in the import and export business is based on their strategy. The world market is not a perfect as it is characterized by the uncertainty. Participation in foreign trade is one of the main factors that determine the economic development of the country. Foreign trade consists of both inward and outward movements of goods and services in a country. When participating in foreign trade, the country is able to earn foreign exchange. The growth of foreign trade is also determined by the export import policy which a country has. Foreign trade is competitive and dynamic hence there is need for a good framework for the trade (Nelson 27). Terms of trade in Australia In Australia, terms of trade are an important determinant of the economic welfare. Terms of trade have been used as the main determinants of the imports that can be made with a certain amount of the exports. When there are shocks in terms of trade, the country suffers from implications based on the incomes and change in the prices. Australia international trade has been composed of commodities while the imports are mostly manufactured goods. Over four fifths of the country exports have been made up of commodities while the imports of manufactured goods have taken almost the same proportion. It has been suggested that for the countries whose main exports are commodities and imports manufactured goods, their terms of trade are always in decline. This is due to fact that there is a reduction in the demand for the raw materials which is related to economic development. The countries whose exports are mainly manufactured goods have a greater market power (Export Council of Australia). Customs All goods Australia market imports have to be cleared by the customs. The customs department has set their rules and regulations which must be followed at all times. The importers are supposed to have a customs clearance, which depends on the set good value limit. The goods above or below the set limit are forwarded to be cleared through the informal clearance document (ICD). This means that importing goods to Australia have to meet the set custom duty and other taxes. Though there is no requirement by the customs department to have licenses, there are cases where the need of permit of clearance is required. Goods to be exported must undergo export entry requirements. The exporters are supposed to have a permit or license before commencing on exports. The country has also set rules on dumping and subsidies. Dumping occurs when goods are imported at a lower price than the prices at the domestic market. There are remedial actions which are carried out for the overseas supplier who violates the dumping rules. There are also specific subsidies which are accorded to the exports (Australian Customs Service). International trade is also subject to international agreements. Due to trade liberalization, several rules and regulations were put in place to ensure there is free and fair elections. The rules set by the WTO and GATT has been a major determinant in the international trade. Australia being a member of the WTO has to follow all the set rules when participating in the international trade (Export Council of Australia). Challenge of exchange rates The Exchange rate is an important factor in the international trade. The valuations of the currencies in different countries have a great effect on the international trade. When there is currency undervaluing, the exports are promoted while the imports are restricted. The opposite happens when the currency is overvalued which leads to increase in imports. Misalignment in foreign exchange affects trade in a great way. When the currency is overvalued, trade policy may be used to compensate for it. For fair trade to exist, the countries are supposed to continuously monitor their exchange rate in line with those of the trading partners. There is a need for the countries also to consider the exchange rates of their competitors. Balancing the exchange rate is one of the measures for balancing of foreign trade. Multilateral cooperation has been one of the suggested measures to ensure that there is stabilization of the exchange rates. Those engaging in imports and exports are thus subject to the fluctuations and volatility of the exchange rates. Thus, monitoring exchange rates is one of the most important factors that traders in international business look at (Nelson 31). Trading partners and barriers Australia has many international trade partners. The most important trade partners for Australia are China, United States, United Kingdom, Japan and New Zealand. Australia most important market is USA due to imports of manufacturing, software, technical and mining industries support. As Australia engages in international trade, the major barriers lies in local culture, business practices and language barrier. There are also issues related to the existing local regulations and modes of payments (Export Council of Australia). Australia development has been reliant on international trade. In the job sector, it’s estimated that one in every seven jobs are as a result of export trade while the imports accounts for one in every 10 jobs. The country has taken advantage of the market liberalization in the East Asian countries. Australia is committed to the multilateral trade agreements where WTO is one of the main factors in open trade. The country has benefited immensely from the foreign direct investment which have boosted international trade. Among the multinational companies operating in Australia are West farmers, BHP Billiton, Rio Tinto and Woolworths (Export Council of Australia). Conclusion and recommendations In conclusion, international trade serves an important part in Australia economy. Trade levels in Australia are high due to its development. With globalisation, the international market has become liberalised with little or no government intervention. Liberalisation of trade has helped countries such as Australia to increase their volume of international trade. Both imports and export trade in Australia are regulated through the customs. The customs determine the licence fees and other charges upon foreign trade. Foreign trade has been on increase in Australia with United States and China being the most preferred trading partners. The country has benefited from economic development and job creation. As a country engages in international trade, foreign exchange is one of the factors that affect trade. Multilateral cooperation on exchange rates acts as main determinants of stabilisation of the foreign exchange rates to enable balance in foreign trade. Other factors that affects foreign trade a business should look at are cultural differences, language barriers and trade policies and regulations in different countries. For a business engaging in international trade, there is need to understand all the issues and risks involved as discussed in this report. References Australian Customs Service, Customs Guide to Importing and Exporting, Australian Customs Service, 2014. Http://www.arts.qld.gov.au/publications/pdf/ex_im_ex.pdf. 1st Sep 2014. Czinkota, Michael, Ronkainen, Iikka & Moffett, Michael. International Business. Mason, OH: Thomson-South-Western, 2003. Print. Export Council of Australia. Australia’s International Business Survey: 2014 Report, 2014. http://sydney.edu.au/business/__data/assets/pdf_file/0015/201651/AIBS_2014_Report.pd f. 1st Sept 2014. Folsom, Ralph., Gordon, Michael. & Spanogle, John. International Business Transactions and Economic Relations. St. Paul, MN: Thomson, 2005. Print. Nelson, Carl. Import Export: How to Get Started in International Trade. New York: McGraw- Hill, 2000. Print. Read More